Airlines Required to Provide Cash Refunds, Scrap Hidden Fees

The U.S. Department of Transportation (DOT) on Wednesday took one of its strongest stances to date to protect the traveling consumer. The agency issued new rules mandating that all airlines flying to, through, or from the United States provide travelers with immediate cash refunds in the event of a cancellation or significant delay.

“Passengers deserve to get their money back when an airline owes them—without headaches or haggling,” U.S. Transportation Secretary Pete Buttigieg said in a statement. “Our new rule sets a new standard to require airlines to promptly provide cash refunds to their passengers.”

Paul Hudson, president of FlyersRights, an airline passenger advocacy organization, noted that prior to the implementation of this new rule, the airlines had guidelines they didn’t necessarily have to follow. “Some would, some wouldn’t,” said Hudson. “But now, there’s a hard-and-fast rule that says that if your flight is canceled for any reason or if it’s delayed more than three hours domestically, or six hours internationally, you have an automatic right to a refund.”

Like any rule created by the DOT, “if an airline violates it, they are subject to fines,” Hudson added, emphasizing that the new refund rule applies to any flight that is canceled or significantly delayed—for any reason.

“If the weather is bad and the flight doesn’t fly, you still get a refund, unless you accept the alternative,” he said.

Here’s exactly what the new airline refund rule entails.

New refund rules for airlines

Effective October 2024 (airlines are being given six months to implement the new DOT rule), airline passengers will be entitled to a prompt refund for:

• Any canceled or significantly altered flight. You will be able to get a refund if your flight is canceled or significantly delayed if you do not accept the travel voucher or alternative transportation offered by the airline. The rule defines a significant delay or change as a departure or arrival time of more than three hours after initially scheduled for domestic flights and six hours for international flights; a change in arrival or departure airport; an increase in the number of connections (for instance, adding a layover to what initially supposed to be a nonstop flight); a downgraded class of service; connection through a different airport; or switching to an aircraft that is less accessible for a person with a disability.
• Delayed baggage. You will be entitled to a refund of your checked bag fee if your luggage is not delivered within 12 hours of a domestic flight arrival or 15 to 30 hours after an international flight arrival (the time frame is dependent on the length of the flight).
• Services that aren’t provided. A refund will be required for any service that was paid for but not received, including Wi-Fi, specific seat selection, and in-flight entertainment.

Before the DOT issued this new rule, airlines could create their own parameters around what flight-schedule changes would result in a refund. Consequently, “refund policies differed from airline to airline, which made it difficult for passengers to know or assert their refund rights. DOT also received complaints of some airlines revising and applying less consumer-friendly refund policies during spikes in flight cancellations and changes,” the DOT stated.
According to the new rule, the required refunds from the airlines will need to be:

• Automatic: Airlines need to automatically issue a refund without making passengers “explicitly request them or jump through hoops,” the DOT stated.
• Prompt: Refunds should be issued within 7 business days for credit card purchases and 20 calendar days for other payment methods.
• Issued as cash or in the original form of payment: Airlines can’t sub in a travel voucher or future flight credits unless the passenger agrees to the alternative form of payment.
• For the full amount: The refund must include taxes and fees, minus any portion of transportation already used.

Also, the airlines will be responsible for immediately informing travelers affected by a canceled or significantly delayed flight that they have a right to a refund.
“The DOT’s new rule is a watershed moment for passenger protection in the airline industry, making it easy and accessible for consumers to get relief,” William J. McGee, senior fellow for Aviation and Travel at the American Economic Liberties Project, said in a statement.

McGee noted that the move is the latest in a “sea change in the DOT’s enforcement activity,” including most recently an effort to give state attorneys general more power to address consumer complaints.

Consumer advocate and founder of the nonprofit advocacy group Elliott Report, Christopher Elliott, echoed to Afar that the new rule was “a long time coming and long overdue. U.S. air travelers should not have to worry about their refunds or struggle with understanding how much their airline ticket will cost. Airlines have made untold millions of dollars because of the confusion. We deserve better.”

New rules about hidden fees

The DOT has also issued a new rule about what are known as hidden, ancillary, or “junk” fees.

“The rule requires airlines and ticket agents to tell consumers upfront what fees they charge for a first or second checked bag, a carry-on bag, and for canceling or changing a reservation. This will help consumers avoid unneeded or unexpected fees that can increase quickly and add significant cost to what may, at first, look like a less expensive ticket,” the DOT explained in a statement.

The agency estimates that consumers will save more than $500 million each year in hidden fees that they are currently being overcharged for. According to the Bureau of Transportation Statistics data, airline revenue from baggage fees alone grew by more than 30 percent from 2018 and 2022.

Here’s what will need to change. Airlines and airline ticket agents will need to:

• Disclose extra fees upfront. All critical fees must be displayed along with the initial airfare and schedule information, at the beginning of the flight search process; the new rule also prohibits airlines from advertising a “discounted” base fare that doesn’t include mandatory added fees.
• Clearly explain all added fees. Baggage, change, and cancellation fees must all be clearly outlined prior to purchase.
• Assure travelers that seats are guaranteed. “To help consumers avoid unneeded seat selection fees, airlines and ticket agents must tell consumers that seats are guaranteed and that they are not required to pay extra,” the DOT states.
• Clearly state fee exemptions. Travelers might be exempt from certain fees based on airline status, military service, or credit card usage. They need to know that ahead of time.

There is a rolling timeline for implementation of this rule. The airlines have 12 months to put it into effect (on or around April 26, 2025), larger ticket agents will have an additional six months (until on or around October 26, 2025, and smaller ticket agents will have up to 24 months (until on or around April 26, 2026), according to a helpful guide provided by FlyersRights.

Response from the airlines

As for how U.S. airlines are likely to respond to the new rules, Hudson said, “they basically have three options; they can accept the rule that’s been issued and comply with it. They could go to court and try to have it overturned and say that the agency is outside of its power and jurisdiction. Or, they can go to Congress and ask Congress to overrule the regulation.”

For its part, Airlines 4 America (A4A), which represents all of the major U.S. carriers, including American, Delta, United, Southwest, Alaska, Hawaiian, and JetBlue, issued a statement in response to the new rules that its members “abide by—and frequently exceed—DOT regulations regarding consumer protections.”

According to A4A, the 11 largest U.S. passenger airlines issued $43 billion in customer refunds between January 2020 and December 2023, in addition to other forms of compensation.

“U.S. airlines are providing more options and better services while ticket prices, including ancillary revenues, are at historic lows,” the organization stated. “In real terms, average domestic round-trip fares, including ancillaries, were 14 percent lower in 2023 than in 2010.”